Saturday, May 16, 2009

Tea, but No Sympathy

Okay, so maybe, just maybe, I still pay some attention to what's going on in the world. I mean, I do listen to NPR while I'm in the shower and performing my morning ablutions.

And then again while I'm having tea and croissants on china. Mmmmm...a civilized breakfast instead of a bacon biscuit behind the wheel of the car......

So where was I? Oh, yes. Paying attention. Truth is, I still do and boy oh boy thinking about the mighty mess we're in as a nation can send me groping madly for the old fermented grape juice. I would never claim to be the deepest of thinkers, but when forced to consider this or that, I find it necessary to try to find some explanation and then my mind immediately starts imagining solutions. It's like silent brainstorming.

For example, yesterday as I got ready for work, NPR had a story about home foreclosures. Our family just moved on April 1st after MathMan and I made the difficult decision to let Citibank foreclose on our house. We were almost $60k underwater on our mortgage and we knew a move closer to town was necessary before we could ever be able to sell the house in the middle of nowhere. When we contacted Citi to see about renegotiating our mortgage, it became apparent that they were either not interested or able to work with us and so, after many calls and much wasted time, we concluded that the only thing to do was walk away.

After listening to the story on NPR, I think one solution to this problem would be to forbid the large national banks from issuing mortgages. If we were forced to deal with local banks for our loan needs, rather than being steered by mortgage brokers into those hokey big bank loans in the first place, perhaps this mess wouldn't have happened. And I mean that on the micro and the macro level.

When we first contacted Citi about working with us, one of the things we were told was that Citi couldn't work with us because our mortgage wasn't just one single thing on the holder's end. Several entities had pieces of our loan and so to renegotiate would be next to impossible because there were too many stakeholders involved.

It occurs to me that had we been working with a local bank, this kind of thing would be less likely to happen. Local banks are much more integrated into the community. It would be harder for them, I suspect, to avoid dealing with their customers. You've also got word of mouth and local ties to consider. Maybe keeping loans local would be the best way to avoid this kind of problem in the future.

Local banks would still have to be monitored and regulated to make certain that all ethnic groups are being treated fairly, for example, but this is not insurmountable. And letting large national banks do business across state lines hasn't been a full-proof method for eliminating redlining and other unfair loan practices.

The second piece of this mess has been the credit default swap fiasco. The system is so hokey and ridiculous, I can only think that the theives who invented it must have thought they'd become completely invincible after they realized that it was working for them and they were able to rake in huge piles of cash. No one caught on? They were getting away with it? Imagine the conversations they must have had as they swanned about posh settings, acting the peacock for each other with audacious displays of wealth. As BAC writes, there's plenty of blame to be laid at the bankers' and brokers' expensively-shod feet.

The way I understand it, we'd arrived at a place where a large part of the financial game was based on people making their money up front and early, very much like a Ponzi scheme. I'm not an investor and I don't mean to suggest that I understand how the system works, but common sense should tell you that a system based on people collecting huge amounts of money at the front end of their investment would be an incentive for corruption and would also take away from the system that provides its largest payoffs at the back end. Long-term investment would suffer.

It's no so different from parenting. If I tell my kids that they can have some reward after they've completed some task or chore, then they are more likely to complete said task or chore. If I let them have the reward up front, they're much less likely to follow through, or, if they do, they're very likely to do a half-assed job at best.

From the looks of this economic crisis, we are exactly right where I would be if I told my kids that they can have the new cellphone now, but I expect them to clean up the family room later.

Like those preening uber-rich bankers showing off their big-ticket items to their pals, my kids would be fervently texting away to all their friends about their new phone while I stand hip deep in an ocean of dirty clothes, discarded bits of food, the occasional forgotten plate, crumpled candy wrappers, a blizzard of paper bits, the random loose battery, mismatched shoes, a broken off piece of plastic from something I can't quite identify, a bookbag with its guts spilling out, smelly socks stuffed under sofa cushions, someone's half-eaten bagel, and dozens and dozens of open dvd boxes scattered around the room.

Except our financial mess is much, much bigger than that. And it smells much, much worse, too.

19 comments:

  1. No No No you misunderstand entirely.
    The workers are the problem.
    People demanding living wages and pensions that will actually be paid after they are earned.
    It should be obvious that the bankers, oil companies, car companies etc have in fact been doing all the heavy lifting on keeping the economy going. If this were not true how could they have been paid millions.
    I did none of that heavy lifting and no one payed me millions so I rest my case.

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  2. I agree completely. Sadly, the government (as a whole) is interested in bailing out the large corporations. In my world, that's not unlike hunting down kidnappers and paying them even AFTER you have your loved ones back.

    It's sad to realize that personal responsibility is only mandatory for the average person. People in positions of power are somehow exempt.

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  3. In my lexicon that's "ShittyBank" and "Sknak of Anerica." Well actually that's Jon Stewarts renaming of those banks too big to fail. Not only would I not do any business with those "banks," I'll also get my credit card from my local credit union. I don't even trust my local banks. No, in my book it's The University Credit Union, and I've been a customer for thirty years, my mother before me for forty years and then I took over managing her money. They have a history with me as I do with them. I know the tellers and, until very recently when she retired, the branch manager knew me and always called out my name to say "Hi!" when I walked in to deposit a rent check.

    Lovely tea service dear.

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  4. Sadly that should be, Skank of American, not Sknak.

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  5. Oh I heard that story too and I did think of you. Which I did with great love, by the way.

    About a year ago there was a great piece on This American Life called Giant Piles of Money or soemthing like that and it was basically about how the mortgages are all a little bit here a little bit there and all kind of money on paper bullshit.

    *sigh*

    rather *sob*

    Anyway, your post also reminds me of a recent great letter to the editor, written by an older man who was sadly bemoaning what has become of mortgage financing. He described being a young man who wanted to buy a house... How he had to put on a nice suit and go talk to the Scary Banker in his town. And the Scary Banker turned out to be a Nice Banker who helped him get a mortgage.

    His point was the same as yours - it was about community and connection, not ginormous profit for some and fuckyouall for others.

    Well, those are my words.

    This does stink.

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  6. I stand hip deep in an ocean of dirty clothes, discarded bits of food, the occasional forgotten plate, crumpled candy wrappers, a blizzard of paper bits, the random loose battery, mismatched shoes, a broken off piece of plastic from something I can't quite identify, a bookbag with its guts spilling out, smelly socks stuffed under sofa cushions, someone's half-eaten bagel, and dozens and dozens of open dvd boxes scattered around the room.When were you in my living room?

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  7. Great breakdown of the problems we are having in our financial system. One of the best I have ever seen. Maybe they should hire you to fix it.

    We really are in a pickle, all we can do is try our best to work our way out.

    Like I said your special brand of economics is very good. I think you have it down just right.

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  8. Yeah, you're in touch. Now pass me a croissant...and more coffee...
    xx

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  9. I'd offer you a nice juicy loan but...

    :/

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  10. The explanation of why your mortgage couldn't be renegotiated reminded me of the "Margaritaville" episode of South Park. If you haven't seen it, it's well worth watching it online. It's the most succinct explanation of the economic collapse.

    I last refinanced my mortgage 26 years ago. The president of the savings and loan, now a savings bank, told us quite proudly that they didn't sell their mortgages on the open market. That was back when all of this was in the early stages. I wonder if I'll ever find a place like that again.

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  11. Great post Lisa! The victims of disaster are always more in touch with it than those responsible to prevent it. I wonder how the bank rep would have responded had they or their parents been on the unfortunate end of the deal.
    How about sausage biscuits and wine for breakfast?

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  12. I hear ya... been there/done all that.

    And the American Sheople may now say, "Amen!"

    BTW:

    A call out to you and Chloe here:

    http://buelahman.wordpress.com/2009/05/17/buelahgirls-first-dance-recital-and-buelahladys-40th-birthday/

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  13. Excellent, as usual. Basic and concise. It's going to take a long time to sort out the clusterf**k that big banks and "others" have created. Have a great Sunday Lisa.

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  14. IMHO, mostly it's instant gratification. We have an instant gratification society and less and less of a sense of patience.

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  15. Thank goodness they can't eat us or imprison us for being poor. I keep hoping the perfect numbers on a lottery ticket or some unknown rich relative dying and leaving us millions. We can all dream right?

    Have a great weekend.

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  16. Yeah, Lisa, those were the "good old days." When the lender cared whether or not the borrower could repay the loan, because the loan would be on his books until it was repaid. You went to your local bank, which may have been a branch of a bigger bank, but still, it was a comprehensible business arrangement. Now, one bank after another is being gobbled up by a bigger bank, and that one by a bigger bank still, until your head spins, just trying to understand who owns what. But there's no going back, any more than we can go back to the Plymouth in the driveway and a Daddy in every home. Everything is just too damned big and out of control. And it's going to stay that way until it implodes and we go back to living in caves.

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  17. I have a cousin who was almost foreclosed on back in the '90s. His mortgage got bought by another bank and because of what was happening in his life (wife's breast cancer) either he didn't notice it was now with a different bank or maybe didn't get a notice. He kept making payments to the original bank until he got a notice that he was in default with the bank that owned his mortgage. They were all set to foreclose before he got it straightened out. The bank that sold the mortgage never told him not to send them the payments anymore.

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  18. Just change your last name to Bank and I'm sure you'll receive oodles of government cheese. Er, cash.

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  19. I like a good Tea party too! Did you go to any of the Tax Day tea parties? What kind of Tea did you drink? I had a blend of Gunpowder and Earl Grey!

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And then you say....

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